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America Online to Raise Fee For Unlimited Use to $21.95

In a major defection from the standard monthly price of $19.95 for Internet access, America Online, whose 11 million members make up more than half the home Internet market in the United States, announced yesterday that it was increasing its charge for unlimited access to $21.95.

America Online introduced its $19.95 flat-rate plan at the end of 1996. It announced its new pricing at the same time that it disclosed a broad management reorganization that elevated Robert W. Pittman, currently the president of America Online's network division, to the newly created position of president and chief operation officer of the entire company.

In a separate announcement, the company said it was laying off half the remaining employees of Compuserve, the onetime rival that it purchased last week.

Mr. Pittman, the founder of MTV, joined America Online in 1996 and was widely credited with curing the busy signals that had earned the service the nickname America Onhold and with increasing the company's profitability.

''The Internet industry needs to raise prices,'' said Michael Parekh, an analyst at Goldman, Sachs. ''None of the 4,000 Internet service providers that want to grow their subscriber base can make money at $19.95.''

Stephen M. Case, America Online's chairman, said the price increase was not expected to add to the company's profits this year.

''The primary reason is to absorb higher network costs and to fund innovations like new content,'' he said of the price increase.

International Business Machines recently replaced the unlimited pricing plan for its Global Network service with 100 hours a month for $19.95 and an additional fee for more time on line.

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Telephone companies, on the other hand, have been lowering prices. Bell Atlantic is offering unlimited Internet access at $17.95 a month, and MCI Communications recently dropped its rate to $14.95 a month.

Mr. Pittman said yesterday in a telephone interview that the price increase might slow the company's rapid growth by prompting some customers to cancel their memberships. But he predicted that it would be ''a one-time blip'' and that ''we will go right back to the growth curve, albeit more slowly.''

Customers, he said, would still be willing to pay extra for America Online's content, service and reputation.

America Online also offers a plan that costs $4.95 a month for the first three hours and $2.50 an hour after that. Three-quarters of its customers, however, are on the unlimited plan.

The company announced that it would lay off 500 of the 1,000 employees of Compuserve, mostly from customer service, which will be contracted to outside companies. In addition, the company said it would halt development of a planned new service that would have offered Compuserve's on-line forums on a wide range of topics to users of the Internet's World Wide Web. Instead, America Online said it would concentrate on improving the main service, which has more than two million paying customers.

As for the appointment of Mr. Pittman as the No. 2 executive in the company, Paul W. Noglows, an analyst with Hambrecht and Quist, said: ''This is a real positive for AOL. He has the energy to build the AOL brand going forward.''

As expected, the heretofore independent America Online Studios division run by Ted Leonsis, who was once America Online's president, will be folded into Mr. Pittman's oversight, and its advertising and marketing functions will be combined with a unified, companywide sales operation.